Accountability Part 5: 7 Critical Truths

(This is the fifth and final part of a five-part series on accountability)

In 1998 I was walking to lunch with the accountant — outside accountant, CPA, partner in a regional firm — who handled our Palo Alto Software business. Making conversation, he asked me to talk about growth. We had 20 employees then. He said:

The hardest growth point in business is from 25 to 50 employees.

I didn’t really believe him then. And I believe him now. Palo Alto Software has more than 40 employees now. We went up to 36 by 2001, then back to 22 later that year (recession problems), and we’ve grown back to more than 40 since. And I’m pretty sure now that the stumbling block, the traps and pitfalls he was talking about, might be called structure, or scaling, or management; but all of those roll up into accountability.

For the record, I do have a fancy graduate business degree, and maybe they were teaching this stuff when I was in business school and I just wasn’t paying enough attention; but this feels like stuff I learned by doing, not in a classroom.

I think I can summarize this series with the following seven points:

1. Accountability is critical to small business growth.

I refer back to my previous post on the accountability dip. People work together well and easily and often as you grow from one or two to 10 or 20; but somewhere between 20 and 50 the structure gets more important. You need to figure out who reports to whom and who’s responsible for what. Just assuming things will get done doesn’t cut it.

This takes a change in culture. Sometimes it’s a drop in perceived quality of office life. It’s hard to do.

2. It’s about people.

While it relates to tools and planning and locations in points 3, 4, and 6, it really comes down to people skills. There are built-in hard moments, when people fall short of expectations and somebody has to follow through with acknowledging disappointment.

Tools can help keep people close, focus on specific goals, metrics, tracking, and analysis. Think of the magic of pay-per-click advertising on the web, and apply that delightfully high level of analytics — an enormous luxury compared to what we used to work with early in my career — to projects, and work, even emails and telephone answering. Break things down into objective measurement and analysis. That really helps. I predict we’ll get more tools and better tools over time, as work spreads out onto the web. These are all tools that build communication and contact.

4. Place matters less every day.

The past is accountability by time clock and physical location. Who’s in the office, and how much. The future is remote working and working from home and teams connected virtually by instant messenger or yammer and basecamp and the like. I’m very close to a CTO who manages a team of programmers in four or five different countries, in real time.

5. Metrics are magic.

I called my part 3 Metrics and Management. The more metrics in the business, the better. Not just sales, but calls, trips, minutes, leads, presentations, milestones, bug fixes, minutes per call, or whatever you can. People like to watch their own metrics, and metrics make the hard side of accountability — the bad news — easier to manage.

6. Planning process is critical.

Not just a plan, but planning process: the plan has to set the expectations and establish the commitments, and the planning process has to track results and changing assumptions and revise and manage. Metrics are about tracking, and they’re part of planning. A business plan is a necessary but not sufficient condition — you have to follow up on results, watch changing assumptions, and make the course corrections. You can actually do it without a business plan if you have all the metrics and tracking set up, but by the time you do, you have a business plan whether you realize it or not.

7. More than anything else: set expectations and follow up on performance.

It’s sort of like this: if I were to write a book on successful dieting (and I can’t; I’d have to lose about 10 pounds first) it would have one page, saying: “Eat less. Get more exercise.”

Similarly, the complete book on accountability in small business could have one page saying: “make expectations explicit and measurable. Then measure performance. Reward good performance and make the disappointment for poor performance clear and explicit. Over time, weed out bad performers.”

That’s a lot easier to say (or write), I’m afraid, than to do. And on this one, I’m not pretending I’ve been that good at it, either. But I do know that it’s critical to small business growth.

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About the Author: Tim Berry is president and founder of Palo Alto Software, founder of bplans.com, and co-founder of Borland International. He is also the author of books and software on business planning including Business Plan Pro and The Plan-as-You-Go Business Plan; and a Stanford MBA. His main blog is Planning Startups Stories. He’s on twitter as timberry.

Tim Berry is Founder and Chairman of Palo Alto Software, Founder of Bplans, Co-Founder of Borland International, Stanford MBA, and co-founder of Have Presence. He is the author of several books and thousands of articles on business planning, small business, social media and startup business.

This was another great piece of practical advice and insight. I found this series very helpful and the way you break it all down in each piece you’ve written makes it very easy to digest and understand. I’ve learned a lot – thanks for writing this series.

Hi Tim – I’ve really enjoyed this series. Having one of those schmancy degrees myself, I’ve come to appreciate the difference between learning something in a book and then coming face-to-face with the reality and actual integration of the lesson.

One little tweak. While I believe measuring and metrix are really important – I actually have clients that measure EVERYTHING to the third decimal place and that’s overwhelming as well as useless.

Do you have a favorite critical few measurements that you could recommend?

A well thought out list of seven points. I’d have to agree that web tools can be extremely handy. It’s been exciting over the last few years as tools have developed. As remote working evolves, I can’t imagine what will be thought of next.

I think it always starts with the easiest and most obvious, which are sales, by units and price and person and channel and so on; and cost of sales and expenses.

A nice addition to that is to break things down into discretionary vs. non discretionary so you differentiate between what a manager can control and what is automatic and built in. That helps focus on control.

Beyond those most obvious metrics, a lot of other ones break down by job function, or type of business, so it’s hard to generalize.

In a software business, for example, the product development team watches time to completion and modules completed and support incidents per serial number per version. But the customer service team looks at calls and minutes per call and emails answered and average wait per email answered. The finance team looks at collection days and payment days. The web team looks at unique visitors, page views, and conversion rates. And the blogger and social media types (including me) look at subscribers and followers (we’ve avoided the temptation to count links in LinkedIn or friends in Facebook, so far).

These are of course not the right answers, just the ones we work with in a software publishing company. If we were a restaurant I imagine we’d be looking at things like meals served and items ordered and times ordered per menu item and average time on the table, entirely different things. And when I was doing just consulting I watched billable days and repeat engagements. And back when I was a wire service journalist we used to get scores for who used the UPI story vs. who used the AP story.

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